Telkom Kenya disclosed that over half of its revenue is paid to Safaricom and other operators as costs for handling calls, placing the company in a loss-making position. The Communications Authority of Kenya (CA) reduced mobile termination rates (MTRs) from Sh0.99 to Sh0.12 per minute, prompting legal action from Safaricom, which earns Sh6.5 billion annually from these charges.
The CA's decision to cut MTRs and fixed voice termination rates (FTRs) aims to boost market competition and lower consumer costs. Telkom Kenya and Airtel supported the move, arguing that reduced rates would create a more level playing field. However, Safaricom challenged the ruling, claiming the rates should increase to reflect operational costs.
Stellar Wawira, Telkom Kenya's public policy head, stated that over 50% of the company's mobile revenue is spent on MTR and FTR settlements. She emphasized the CA's commitment to protecting consumers, though no specific figures were provided to back the claim. Airtel and Telkom, with market shares of 29% and 2% respectively, remain in financial losses, while Safaricom reported Sh68 billion in profits for the year ending March 2022.
The revised rates, effective after a six-year freeze, follow historical adjustments. MTRs were cut to Sh1.44 per minute in 2012 and further reduced to Sh0.99 in 2015. Then-President Mwai Kibaki halted further cuts in 2011 amid operator concerns about revenue declines. The CA argued that lower rates would grant smaller operators greater pricing flexibility to compete with Safaricom.
Safaricom's appeal to the Communications and Multimedia Appeals Tribunal accuses the CA of using obscure benchmarks. The regulator countered that the changes would benefit consumers and address disparities in operator scale, noting Safaricom's economies of scale leave it with lower costs compared to smaller rivals.
